In stock markets, future expectations are more important than present results. From this perspective, cash has played against it for years due to the rise of other payment methods. Even more so since the pandemic, when there were even recommendations to reduce the use of cash as a preventive measure.

“I usually have some cash only for some businesses where you can only pay high amounts with a card. If not, I wouldn’t have anything on me”, explains Jerónimo Sánchez at the doors of a cafeteria in Madrid. This perfect storm has sharply reduced the use of coins and bills, although these are still the preferred payment method, according to a recent study by the Bank of Spain: two thirds of purchases in physical stores are made in cash.

What is evident is that the trend in the decline of physical money has accelerated. At first there were differences based on the age of the consumers —those over 55 are the ones who use cash the most, although the gap between generations is narrowing. The virus has driven this evolution, like pouring gasoline on a fire. “The pandemic caused by the covid could have accelerated a trend that has been observed for years, so that, currently, there is a higher percentage of purchases that are made online and, in general, less use of cash that in 2019″, includes the article Use of cash and other means of payment: how is the way we pay changing?, prepared by the Spanish banking supervisor.

With the coronavirus there were several factors that contributed to the change in habit. Prevention of the virus and the reduction of limits on the use of certain means of payment stand out: “Before the pandemic we had a minimum of six euros to pay by card, but we removed it because there were people who were even afraid of exchanging coins and bills ”, recalls Jorge Chen, owner of the Tomaté el placer bar, in Madrid, who has maintained this policy. According to Paloma Real, general director of Mastercard, these changes are also understood by the benefits offered by electronic and digital payments. “Greater simplicity, speed, and security for consumers, businesses, and society as a whole,” she says.

In addition, to understand the decline, we must add the increase in online purchases, where the possibility of physical payment is limited. An explosive cocktail against cash that, despite everything, continues to be the most used method in physical stores: 65.6% of operations were made with cash. Of course, this figure was 83.2% in 2019. “It is important to note that cash continues to play a very important role, being used widely and generally,” settles the study by the Bank of Spain. From the Denaria platform, which defends cash, they highlight this preference: “People want to be able to use cash and they do so very often. They cannot be deprived of that right”, maintains its president, Javier Rupérez.

There are several modifications that are settled, although a mantra remains in the minds of consumers: it is still easier to pay small amounts with physical money (if you carry something with you) than with a card. “In general, cash payments are used for purchases of a lower amount,” says the study. Specifically, the average payment in cash was 22.6 euros, while with a card this figure rises to 38 euros. Blanca López, after paying at a store in the capital, assures that most businesses already prefer plastic regardless of the amount: “I almost always use the card.”

More card use and mobile payments

Thus, the beneficiaries of this decrease are payments with mobile applications and, above all, the card. The second most used means, according to the supervisor’s study, is the bank card: it was used in 28.3% of purchases, 13 percentage points more than in 2019. In addition, having a higher average ticket, it represented 36 .8% of total spending on shops. For its part, the use of mobile phones has gone from being something residual in 2019 to being used in 3.7% of payments in physical stores. Eduardo Prieto, general director of Visa in the country, highlights the facility that is offered in Spain to use different alternatives to pay for purchases: “There is a very good payment infrastructure and a lot of potential for digital media to continue growing and displacing cash ”.

The advance in the use of mobile phones has been even greater in transactions between individuals, where 13.1% of transactions are already concentrated (in 2019 it accounted for only 8.5%). Here the use of cash also prevails, in 71% of the transactions, although this is 20 percentage points less than in the previous survey. “The decrease in the number of cash payments would be related to a greater ease in making this type of payment digitally thanks, among other things, to new payment methods, such as Bizum,” the study added. Looking to the future, it is expected that these alternatives will gain even more weight, although as Juan Orti, president of American Express Spain, explains, this year cash has taken a bit of breath: “In 2022 Spanish consumers have slightly recovered the use of cash”.

Other sources in the money transport sector believe that behind these changes in habits there are economic interests of States and financial institutions: “It is not a digitization of payments. They want to replace cash with cards because it allows a higher income from commissions and less costs in transferring money”. It is true that there is business with the use of plastic to pay, although there is equally in the use of cash for other companies.

Predominant in Europe

In the old continent, the dynamics that are followed are similar, as can be seen in the survey published by the European Central Bank (ECB) last week. In community economies, 59% of merchant transactions were with cash, after noting a drop from 72% in 2019. “While the move towards cashless payments continues, as the report shows, cash remains playing an important role. It continues to be the predominant payment method at the point of sale and for person-to-person payments,” Fabio Panetta, member of the Eurobank Executive Committee, stressed in the study.

In fact, the majority of community citizens highlight the security that physical money offers them. “60% of consumers considered the option of paying in cash important or very important.” The reasons are, as in Spain, the containment that they can carry out on spending, anonymity and privacy. In favor of the cards, on the other hand, highlights the comfort and the fact of being able to do without carrying money with you, as well as speed and security.

On the other hand, where there are no significant changes is when making non-recurring payments (rent or mortgage, loans, household supplies, taxes, insurance, subscriptions, telephony, internet, and transportation). In these cases, dominance in Spain continues to be overwhelming for direct debits: 77.5% of this type of payments are direct debits and the amount of said direct debits reaches almost 80% of the total, while the card is the second medium most used followed by bank transfers.

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